Collapse Of Esm Weakens Budget

February 5, 1986|By Todd Nelson, Staff Writer

POMPANO BEACH — A general fund balance of only $1.2 million has put city officials planning next fiscal year`s budget in a weak position, the city`s independent auditor said at Tuesday`s City Commission meeting.

Keith Cobb, managing partner of the accounting firm of Peat, Marwick, Mitchell & Co., made the assessment in presenting the firm`s financial report on the city for the 1985-86 fiscal year, which ended on Sept. 30.

The loss of $12.2 million in the collapse of ESM Government Securities Inc. of Fort Lauderdale in March, which included $2.3 million from the general fund, left only $1.2 million in the account, according to Danny Crew, the city`s general government director.

``The numbers are low, there`s no question about that,`` Cobb said. ``It is a weak financial place to be.``

City Manager James Soderlund said city officials would begin meeting today to discuss the implications of the general fund shortfall for next year`s budget.

The auditor`s report otherwise contained little news for commissioners or city officials but added details to earlier reports that ``disclosed substantial weaknesses in internal accounting control`` that could ``expose the city to unwarranted financial risk.``

In October, before concluding its yearly report, the firm alerted city officials of the weaknesses and conditions it had discovered in the city`s Finance Department.

The problems included accounts that hadn`t been reconciled for six months, out-of-balance accounts and bookkeeping errors, the report said.

The report, completed last week, expanded on the causes of those conditions and recommended ways to improve the department`s organization and efficiency.

Finance Director Larry McNerney said the early notice allowed officials to carry out some of the report`s recommendations, including hiring a controller and treasurer, allocating $200,000 for new accounting systems software and hiring part-time employees with accounting experience to assist the department.

Crew, the city`s general government director, said the general fund normally contained $3.5 million, money that was budgeted but never spent, at the end of the fiscal year.

To cover general fund expenses after the collapse of ESM Government Securities, he said, the city last summer borrowed $1.8 million from its sewer construction fund, giving the city the money it needed to meet its payroll, pay bills and continue operations.

Crew said repaying that loan will cost the general fund almost $300,000 a year for the next seven years.

``It will take a few years of some fairly conservative fiscal measures`` to compensate for the loss, Crew said.

Those measures may include requiring more work out of the same number of city employees and using some equipment and supplies for longer than usual, Crew said.